Veriton Investment

Apollo’s Zelter Predicts ‘Washout’ With Some PE Firms Dissolving

(Bloomberg) -- The prolonged fundraising slowdown for private equity isn’t going to reverse course anytime soon and poses an existential crisis for certain firms, according to Apollo Global Management Inc. President Jim Zelter.

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“I don’t expect a massive monetization cycle to hit,” Zelter said Tuesday at the Barclays Global Financial Services Conference. “I think there’s many, many PE funds that are out there that have raised their most recent fund and don’t realize it’s their last fund.”

Since 2022, elevated interest rates have curbed private equity dealmaking and slowed cash distributions to fund investors. That means those backers have less cash to put into new funds, creating a parallel drought for both deals and fundraising.

Private equity fundraising fell in the second quarter, with $149.9 billion raised globally, down 4.6% from $157.1 billion in the first quarter, according to a report from law firm Paul Weiss.

“There will be some firms that are just not around in five to seven years, but that’s a natural washout,” Zelter said. He expects Apollo to be “one of the handful of winners,” however.

KKR & Co. Chief Financial Officer Robert Lewin made a similar observation at the Barclays conference earlier, contending that private equity firms will start disappearing as the industry consolidates.

“You’re going to see a fair bit of GP consolidation over the next five years,” Lewin said, referring to general partners, the industry term for private equity firms. “And that should inure to the bigger players, and certainly the players who’ve been able to deliver on behalf of their clients, and we feel well-positioned there.”